• Gold price rises as the Fed remains stuck with projections of three rate cuts this year.
• US yields fall sharply as market expectations for the Fed starting rate cuts from June rise.
• An improved US economic outlook could restrict the downside in the US Dollar.

Gold price (XAU/USD) clings to gains near fresh all-time highs around $2,220 in Thursday’s European session. Investors are gung-ho on Gold as markets increasingly expect the Federal Reserve (Fed) to lower interest rates in the June policy meeting. 

The speculation over Fed rate cut hopes for June escalated after the quarterly updated dot plot of March’s policy meeting showed that three rate cut projections for this year remain on the table. Comments from Fed Chair Jerome Powell also helped to firm demand for Gold. Powell said policymakers are confident that underlying inflation is easing despite sticky February’s inflation numbers. Firm expectations for the Fed reducing interest rates diminish the opportunity cost of holding investment in non-yielding assets such as Gold. Meanwhile,  yields on 10-year US Treasury bonds fall by 1% to 4.23%.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rebounds to 103.50 after the decline was seen post-release of the dot plot.  However, upwardly revised forecasts for the Gross Domestic Product (GDP) and the annual Core Personal Consumption Expenditure Price Index (PCE) for 2024 could limit the US Dollar’s downside. An improving US economic outlook bodes well for the US Dollar.